Harry S. Dent Jr.'s Blog, page 119

This New Instrument Could Make Waves in the World of 3D Printing

There is an unwritten rule in biotech innovation that states epic engineering requires epic tools. Truly disruptive technology that changes the way we live our lives is often fast-tracked by new means and methods used to create it.

Researchers at Carnegie Mellon have embraced this mantra by researching the use of an instrument called the “acoustic tweezer.”

Ok, I know that doesn’t sound earth shattering, but it could make waves in the world of 3D printing!

The field of 3D printing has grown a new leg, no pun intended, called bioprinting.  Yes, no longer can you just print out forks, shoes, and paperclips. Now scientists have discovered how to print out cellular-tissue structures: basically, organs!

The largest issue in this new bioprinting field though is keeping the tissue alive after it’s printed. Developing complex structures and implanting cells has become quite the task.

Enter the acoustic tweezer. This interesting piece of biotech manipulates the organ’s tissue at the cellular level by using acoustic waves. This allows for a much safer and effective method to develop the cellular infrastructure within the tissue to keep it alive.

I am tracking the impact of this disruptive technology via my social media collective intelligence system. In the past we’ve been able to get a jump on the market by discovering emerging trends in social media before they hit mainstream news.

Personally, I was excited about this technology just on the de-splintering applications alone.

Ben Benoy

Editor, BioTech Intel Trader

The Markets Are Scary, But There’s Hope

Earlier this week, Harry Dent sent me the nicest email ever.

The opening line read:

Adam, I continue to be impressed both by your unique insights and your returns in a market that is even defying most leading hedge funds .

Pretty nice, right!?

Most people wouldn’t have been able to fit their head through their office door after receiving such a complimentary note. (And my wife might say I had a mild case of that infliction.)

But the reality for me is that a boat load of pressure and expectation dropped onto my shoulders.

I was reminded, more than ever, just how important the interplay between Harry’s economic forecasts, and my actionable investment advice, will be in 2016.

I’m sure you can agree with me on that. And also that it’s an understatement of gargantuan proportions to say:

“Markets have changed a lot in the last few years.”

In 2013, almost everything went up.

Last year, almost everything went down.

And since prudent investors have always had a difficult time navigating environments of heightened uncertainty, excessive volatility and spiraling stocks prices… 2015 likely ripped a hole through traditional portfolios and investors’ business-as-usual mindsets.

And according to Harry, 2016 isn’t going to be any better for wishful thinking “buy-and-hopers.”

But my message today is NOT one of doom, gloom or despair.

It’s one of hope and confidence.

Because it’s in exactly these environments that Harry so accurately forecasts that we find the most opportunities. I’ll give you an example…

Alongside the market carnage of the last 16 months, the “All About the U.S.” investments I recommended to Boom & Bust subscribers in September 2014 are up big!

You see, back then I was struggling through a nagging conflict in my mind. It’s a conflict that our subscribers struggle with as well (and I hope to clear this up today).

Harry’s research was pointing toward weakening demographic drivers, weakening economic growth and weakening asset prices. He expects we’ll see the biggest wave of deflationary pressure since the 1930s… and in such an environment there are only two “safe” investments: high-quality U.S. debt and the U.S. dollar. (“That’s effing IT,” he’s often screamed in our meetings, except not censored like that.)

But that doesn’t mean those are the ONLY opportunities up for grabs.

You see, Harry’s job is to be ahead of the curve… to warn you of what’s to come, especially if no one’s talking about it yet. And clearly his research into demographics gives him, to quote his 1990-published book title, the power to predict.

But my job is different. My job is to give you actionable investment advice for any environment. And my #1 rule has always been: trade WITH the trend, whether that’s up or down, like it or not!

So, as I saw it in September 2014, I had both an obligation to myself and to Harry. I had to stick to my own proven investment methods… and I had to protect our readers from what Harry saw coming.

Ultimately, our obligation is to YOU. To both prepare you for what we see coming (Harry’s expertise)… and to help you make money along the way (my expertise).

Eventually, I found a creative way to satisfy our shared goal.

All About the U.S.

In the September 15, 2014 issue of Five Day Forecast, my weekly market note that comes complimentary with a subscription to Boom & Bust, I recommended two positions, which I called our “All About the U.S.” trades.

Here’s how I introduced this unique, low-risk investment at the time:

The U.S. dollar is on a tear, gaining 6.6% against the euro and 5% against the yen, since May 1. To me, this is a clear signal that U.S. stocks will outperform other markets during good times and bad.

But first, I’ll start by asking this question: are you really an investor if you’re just sitting in cash?

Here’s another head-scratcher: if going to cash was completely out of the question, how would you invest in a toppy stock market?

Well, that’s the crux of the investor’s dilemma, today. U.S. stocks appear expensive and toppy after a five-year bull run. Yet, cash yields nothing. To top it off, the Federal Reserve continues to support risk assets, particularly U.S. stocks. And since the Fed’s intervention is artificial, it’s anyone’s guess when the music will stop.

The good news is that you don’t have to guess anymore! It’s no longer about finding the perfect time to yank your money out of U.S. stocks. Instead, it’s about finding a way to invest in U.S. stocks and protect yourself when they stumble. And that’s what we aim to help you do here at Dent Research.

I went on to explain why Harry and I were skeptical of what was then the most-enamored foreign stock market of all (which was hitting a three-year high at the time).

And I gave Boom & Bust subscribers specific instructions on how to make a hedge-fund-like investment that was poised to benefit from the unsustainable imbalances that Harry and I were both seeing, through our own unique perspectives.

My recommendation wasn’t muddied with “could be’s” or “might see’s.” I gave clear instructions on what to buy and what to sell… tickers and all. And then we began tracking the performance of those, as we do with all Boom & Bust recommendations.

So where are we today… about 16 months later?

Our February issue of Boom & Bust went to the printers on Wednesday. And in it we instructed readers to take partial profits on these two “All About the U.S.” positions.

One for a gain of 10.1%.

One for a gain of 14.3%.

Those are solid gains we can be proud of.

And remember, this wasn’t a bet against Harry’s forecast. Instead, it was a bet in support of it. We weren’t making a play that relied on the U.S. performing well. Instead, we were making a play only on our expectation that the U.S. would do better than two other regions.

Even better, we were able to point subscribers toward these gains while cutting our risk to the bone, since our positions were market neutral (meaning, they didn’t require a bet on the outright direction of stocks).

We’re particularly thrilled today, given how poorly a majority of global assets have performed since we recommended these investments.

Bonds are down an average of 3%…

U.S. stocks are down 7%…

Currencies are down 12%…

Foreign stocks are down 29%…

And commodities are down an average of 39%.

In fact, I was hard-pressed to find a single, major index or asset class that beat our “All About the U.S.” returns of 10.1% and 14.35%, since September 2014.

The only ones were the U.S. dollar (UUP, up 14.5%) and high-quality U.S. debt (TLT, up 10%). Hat tip to Harry for correctly calling “the only two things that go up in a deflationary environment!”

If you’d like to hear about the other opportunities we’re taking advantage of right now… and any new ones we’re looking to…

Adam O’Dell, CMT

Chief Investment Strategist, Dent Research

There’s Just Not That Much Reason to Be Positive About Earnings

Earnings season is in full swing. Companies have as much pressure as ever to churn out positive reports even if that’s not what’s reflective in the underlying business. And even though the market has had an absolutely abysmal start to the year, many are still saying the S&P 500 will be up about 10% this year, with earnings up 18%.

Is anyone buying this stuff?

With weak economic growth, flat wages, a strong dollar, and consumers stuck in the doldrums, I don’t see much reason to be positive on earnings.

Still, many don’t want to let go of the idea that the bull market could be running out of steam. It’s easier to stick with the herd, and even last year you might’ve made a killing if you invested in some of the glossy tech stories or maybe gun stocks.

But if this is truly a bear market we’re entering, you’re going to be a lot better off capitalizing on the market’s downside. And considering the market hasn’t made any significant moves to the upside for well over a year now, there’s a lot more opportunity on the low end.

As a short seller, I bet against stocks, and I’ve been doing it since 2000 starting with the Internet bubble bursting. Later on I started my second fund to capitalize on the financial crisis in 2007, after which I converted it into an ETF with AdvisorShares that I still manage.

The first thing you have to understand is that most stocks underperform the market. A lot of people on the long side want to sell you on the idea that, over the long term, buy-and-hold is good for your portfolio.

The opposite is true. Fact is, most companies actually underperform the market over time.

75% lost money. 50% were flat to down slightly. 20% were down by 75% or more. And just 25% drove all of the market’s returns.

Consider that from 1983 to 2007 – the largest secular bull market of our lifetimes – among all the stocks in the Russell 3000…

About 75% lost money…

50% were flat to slight down…

20% were down by 75% or more…

And only a quarter of stocks accounted for all of the market’s gains.

So nobody should think that you can just buy a bunch of companies and expect to come out on top. In fact, only one company has been in the Dow since the beginning – General Electric. So if you invested in all the individual Dow companies, you’d pretty much be broke at this point.

That said, there’s a lot of opportunity to hedge your portfolio through finding select short ideas. After all, there are a lot more losers in capitalism than there are winners.

For every company that you own in your portfolio, you need to do a quarterly check-up on that company.

If you’re not reading their quarterly earnings reports, you’re at a major disadvantage. All the big hedge fund managers that control billions of dollars have staffs that do this. That’s who you’re competing against when you own stocks.

So you need to do this quarterly check-up on your companies and figure out if things have changed fundamentally or in the financial statements that indicate that the earnings that they’re reporting are not as good on a sustainable basis as what they’re reporting to Wall Street.

Truth be told, there are plenty of line items that management can manipulate to report whatever earnings they want. And there are plenty of sophisticated accounting techniques they can use to make a stock seem better than it really is.

So as a short seller, my job is to find things that management is manipulating that investors really care about… because that’s what’s going to move the stock price.

Right now, the stock market is full of companies that have taken on millions if not billions in debt while their core business is imploding.

Check to see if you’re holding any of those companies by actually reading your companies’ earnings statements.

Everyone knows you can make money when the market goes up. But you can also make a heck of a lot of money when the market goes down.

John Del Vecchio

Editor, Forensic Investor 

This “Kickstarter Signal” Tipped Us Off to the Next Few Months

Last Friday, we got the mother of all “Kickstarter Signals” as eight stocks closed higher for every one that closed lower.

Historically, this suggests we could see a stronger-than-usual rally over the next few months.

Now, that conclusion is

Gargantuan! The Next Generational Bust Is Coming

Oil can’t seem to get a break. After falling just below $27 last week, oil finally rallied back to $32 before falling back to just under $31 on Tuesday. An oversold bounce was naturally due, with perhaps a bit more to come. But the oil market’s doing exactly what I said it would – cratering!

Meanwhile, in la-la land, stocks have been so focused on the decline in oil prices that they just ignored the other big trigger for a stock decline.

And that came yesterday, when the Shanghai Composite index of Chinese stocks moved 3% below its August low of 2,850!

I wrote back in

Is the Fed Confused?

Tomorrow the Fed will decide whether or not to hike rates again.

Remember, the Fed gave us a nice holiday gift when they last met in December. After months and months of talk, they finally acted to raise the federal funds rate by a quarter point.

After the decision, Fed Chair Janet Yellen held a press conference and basically stated the time was right to start normalizing policy. And the market even moved higher after they raised rates, at least until the end of the year.

Now, we’re facing a market meltdown in the U.S., European stocks aren’t looking so great, and China’s market has plunged even further into chaos. It’s a good thing the Fed didn’t wait again!

Every other Fed meeting the chair gives a statement and takes questions from the press. The Fed also updates their projections for the economy, jobs, inflation and appropriate interest rate policy.

I didn’t really find anything surprising about Yellen’s comments or answers. I did, however, find the updated projections very interesting.

The Fed projected that gross domestic product (GDP) will actually fall. They expect it to hit around 2% by 2018 and stay there, down from the 2.4% projected for 2016.

They predict the unemployment rate will hold steady. According to them, it’ll run between 5% now and 4.7% in the next couple years to about 4.9% in the longer run (good luck with that).

And they slightly reduced their main inflation measure. It’s down at 1.3% now, and they expect it to hit their target of 2% by 2018 or longer.

Remember, 2% was the target they thought they would achieve with zero interest rates and QE!

So, despite their projection that the economy will contract in the next few years and inflation won’t hit their target for at least a couple years, they expect to hike the federal funds rate by a full percent this year, another full percent in 2017 and slightly below a full percent in 2018!

I’m sorry, but I don’t get it. How do the hundreds of PhD’s working for the Fed figure that a slowing economy with little inflation will require more interest rate hikes?

Apparently I’m not the only one confused by the projected Fed policy. According to Bloomberg News, Goldman Sachs says it’s time to sell U.S. Treasury bonds while Morgan Stanley analysts predict a rally.

Lance Gaitan

Editor, 

Amazon Is Taking Over the Globe, and Retailers Should Panic!

By most accounts, holiday retail sales were a letdown. While retail sales climbed 3.3% over November and December, stores reported a 6.4% drop in foot traffic. So even though people might have spent a bit more, they were choosy in where they spent.

When customers spend less, companies earn less, affecting the bottom line. This relationship is on display at companies like Macy’s, which warned that sales were off 4.7% in November and December. The company plans to close stores and lay off thousands of workers. The same story is unfolding at Gap.

However, the pain isn’t equally distributed. L Brands Inc. – owner of Victoria’s Secret and Bath & Body Works – had the best December ever. The differences in what these retailers sell explain the disparate outcomes, and favors another company I haven’t mentioned – Amazon.

I love the Macy’s location on the lower east side of Manhattan. The historic store covers city blocks, and even after the recent renovation it has wooden escalators. It seems like the goods on display go on for miles.

But among the racks lie the source of Macy’s woes. They sell a lot of coats. And scarves. And gloves.

On Christmas Day the temperature in New York City reached 66 degrees, making it the warmest Christmas on record. The current El Nino weather system has been pumping moisture across the U.S., and until early January had kept cold weather systems at bay in Canada. The moderate weather during the holidays found people in New England spending time outdoors in shorts, and not very interested in buying cold weather gear.

Warmer than normal temperatures were expected, but not that warm! The weather caught Macy’s and other large clothing retailers off guard, and with a bunch of unsold inventory.

It’s not that consumers weren’t buying, to which Victoria’s Secret can attest. They just weren’t buying what a lot of major stores had to offer.

Which brings me to Amazon.

For years consumers have been migrating to online shopping. The move was expedited by high-speed Internet (remember the dialup modem sound?), which made browsing faster, and allowed sellers to offer more efficient fulfillment and return procedures.

On Black Friday weekend, brick-and-mortar stores experienced a 10% decline in sales, while online sales grew by 10%. Now, sales at physical stores are still about nine times the size of online sales, so the absolute dollar amounts don’t cancel each other out, but online sellers started their holiday offerings weeks before Thanksgiving. This allowed them to capture more sales sooner than physical stores, which had to wait for delivery of holiday items.

And then there’s the matter of what they sold.

Physical stores are limited by what they have on hand, whether it matches the temperature outside or not. Online, shoppers can browse for whatever they want, even at 2 a.m. on a Sunday.

This trend toward e-commerce, along with the sudden shift in weather-based demand, is music to the ears of online retailers, and no one in that category is happier than Amazon.

The e-commerce giant has branched out in recent years, introducing its Prime membership with free shipping, Amazon video and music streaming, and cloud computing for storage. But the main reason most people visit the site is to buy stuff. And boy, do they buy stuff!

Over the holiday season, Amazon accounted for 42.7% of all online sales.

Think about that for a second.

One company handled almost half of all Internet sales for the entire country. How’s that for reach? In fact, Amazon captured more sales than the next 10 closest online retailers combined, including Best Buy, Apple, and Walmart.

What’s more, the company doesn’t make many things. It’s typically a pass-through for other people’s stuff. If more buyers want swimsuits than parkas, who cares? Sell ‘em what they want!

Amazon’s ability to offer us millions of goods, and then put them in our hands within a day or two – sometimes the same day – without having retail locations is nothing short of a technical marvel.

The company is a bundle of Internet expertise, marketing savvy, and logistical prowess. They are giving us what we want, when we want it, and we’re rewarding them for it with astronomical sales.

They’re also destroying other companies in the process. Macy’s, Gap, Kohl’s, even Nordstrom are all feeling the heat from a competitor they can’t touch, can’t match, and can’t catch.

Those that can’t adapt to the new way of doing business will shrink. Earnings will fall as efficiencies drive down costs, allowing consumers to keep more of their dollars in their pockets.

As for Amazon, their global domination continues.

The company reports earnings on Thursday. I have no idea what they will report. Since inception, they’ve plowed almost every earned dollar back into growth, not focusing on profits. If the goal was to own their space and become synonymous with online spending, they’ve achieved it!

Rodney

Follow me on Twitter @RJHSDent

Investing: How to Find Where the Bodies Are Buried

One of our analysts, John Del Vecchio, has been at this game for a while now. Long before he became Dent Research’s resident forensic accountant, he was a successful short seller and the co-author of what I consider to be the best book written to date on the subject: What’s Behind the Numbers?

In the opening lines of Numbers, John and co-author Tom Jacobs offer to “help you find where the investing bodies are buried so you don’t join them.”

These are just the right words to start a book on the detective work of finding financial chicanery. Our joke around the office is that John is the “Horatio Caine” of finance. Well, if the shoe fits…

Short selling can be a lonely endeavor that requires thick skin. By definition, you aim to win when others lose. This means that when you’re right, you’re hated; and when you’re wrong, you are shown no sympathy. Shorting stocks requires taking an unsentimental approach to investing and – perhaps most importantly – keeping the ego in check. Very few investors have the disposition to be successful short sellers; John is one of them.

So let’s dig into some of John’s secrets.

To start, high valuation is not a sufficient reason to short a stock. A stock that is already expensive can always get more expensive.

We’ve seen it over the past year in the “FANG” stocks: Facebook, Amazon, Netflix and Google (now Alphabet). Shorting these based on valuation would have wrecked your portfolio. In fact, Rodney made Triple Play Strategy subscribers a lot of money trading some of these in 2015.

And what about shorting the stocks of companies engaging in fraud? Good luck finding them! Remember, if management is engaged in something illegal, they’re not likely to mention it in the footnotes of their financial statements.

For John, it comes down to aggressive accounting and specifically aggressive revenue recognition and inventory management. As he writes in Numbers: “The time to sell or short is not when you think a business model can’t survive. The time is when the numbers suggest that management is covering up poor performance.”

John already mentioned in today’s letter that a company might be in a hurry to book revenues, and pull sales forward that otherwise would’ve happened next quarter.

A second, similar metric is Days Sales in Inventory (DSI), which measures inventory build-up.

You don’t need to be a CPA to see why this metric is important. Inventory build-up suggests that the company’s products are not selling as briskly as forecast. It also means that discounts will probably be needed to move the merchandise, which will lower profit margins.

All inventory is not equal, of course. A build-up of raw materials inventory may mean that demand is stronger than ever. It is the build-up of finished goods that should be a major red flag. (This is where it pays to be an accounting sleuth.)

I’ll leave you with two final nuggets of wisdom from John’s book.

First, don’t be too eager to jump into a short position. “You make as much money shorting a stock that falls from $70 to $5 (93 percent) as one that falls from $100 to $5 (95 percent).”  Getting into a trade too early will turn a would-be profitable short into a frustrating loss.

Second, watch out for crowded trades. Don’t short a stock if the short interest is too high as a percentage of the float. This puts you at risk of being short-squeezed as your fellow sellers all scramble to buy at the same time and send the share price to the moon.

Of course, you should listen to John’s

Short Seller: “We Did the Unthinkable…”

Anyone that lived through the 2002 and 2008 bear markets can tell you: nothing quite rattles you like seeing these positions you’ve built up for months, or even years, get wiped out in a flash. There’s even been a few scary times in between when investors have had to hover over the sell button.

So, if we were entering a new bear market, Harry wanted readers to know there was another strategy you could use other than just buy stocks and hope they don’t get swept up in the carnage.

That’s why, besides joining the team to help analyze financial statements and look for profit opportunities to the downside, he asked me to present a high risk/reward trade to Boom & Bust subscribers.

I knew from my experience as a short seller that having a few shorts in your portfolio can help buffer against big declines. It’s also possible to catch many stocks that lead the way down before the general market collapses.

So, per Harry’s request, I chose to make a trade that, up until a couple of years ago, many investors would’ve called crazy. We did the unthinkable, and decided to short shares of one of the titans of American industry: International Business Machines Corp. (NYSE: IBM).

As you can probably imagine, short selling often gets a bad rap. And I’ll admit, it’s a bit of a strange transaction. You sell something you don’t own in the hopes of buying it back cheaper at a later date and collecting a profit. It’s odd, and people tend to shy away from things they don’t understand.

There’s also the concern that short selling can really cost you. A stock can only go down 100%, but it could go up to infinity.

Of course, no stock goes up to infinity. If it did, we could just buy that stock, go have drinks on the beach, and hit refresh on our brokerage account while we retire and watch the money roll in.

Many people also think it’s simply un-American to bet against a company in anticipation that its stock price will fall. That goes double for betting against a major American company like IBM.

The fact is though, that in a capitalist system like the United States, there are far more losers than winners. And for those that do win, no one stays on top forever. All companies hit a bump in the road in their business.

The question is whether management is open and honest about it, or whether they try to pull the wool over investors’ eyes and hide the deterioration in their business?

Sure enough, IBM was up to some weird stuff.

In the old days, the saying was you’d never get fired for buying IBM. Recently, I’ve told people that if money mangers had bought IBM stock for their investors, they should be fired.

I had been following IBM’s stock price back when it hit a high around $215 in 2013, knowing it was a disaster waiting to happen. The underlying business was imploding.

First, IBM was having problems exceeding its revenue estimates. Quarter after quarter, the company was missing revenue estimates by $500 million to over $1 billion. Per quarter!

While that was happening, the company’s receivables were growing quarter after quarter. That made me think there was aggressive revenue recognition at play – which is fancy accountant speak for making revenue seem better than it is.

In this case, IBM offered its customers incentives to buy a product today they otherwise would buy at a later date. This overstates current growth. Worse, it means they were basically stealing their own customers from the future.

On top of that, IBM was reporting a volatile tax rate that often was below what Wall Street analysts had been expecting.

Basically, they were using tax management as a low-quality source of earnings. Instead of going on the offense and growing the business to generate strong earnings per share, they resorted to financial engineering.

IBM also assumed billions of dollars in debt to buy back stock. Buying back stock reduces the share count and increases earnings per share. But not all share buybacks are equal.

So finally, while the business was coming under pressure – and the company’s cash flow was plummeting – I watched as IBM used debt to buy back loads of its stock near all-time highs thinking it would make a difference.

And truthfully, if IBM hadn’t taken on that debt to buy back stock and defend its dividend, the stock probably would have tanked sooner than it did.

But what did that really change?

The reality soon became evident that IBM’s growth initiatives were too small to offset the damage happening in its larger business units. It’s sort of like trying to steer the Titanic away from the iceberg.

Shares of IBM recently hit a low of $118. I don’t know how much more downside there is to the stock at this point, and I certainly don’t recommend adding to short positions (Boom & Bust readers have gained about 27% on this trade and I’ve recommended they hold).

But, it’s a good illustration that high risk/reward opportunities do exist.

And I can assure you, there will be plenty more in the future.

I’ll be hosting a webinar this Thursday, January 28, at 4 p.m. ET (and again at 8 p.m. if you can’t make it). It’s called Earnings Exposed, and in it I’ll show you how you can spot accounting gimmicks like IBM used.

These Stocks May Be The Weak Link In Your Portfolio

I talked yesterday about one of the biggest mistakes most investors make.

That is, thinking that a stock’s recent “price discount” must certainly make it a “better value.” (A.k.a., a “buy” at a “good price.”)

But the sad truth is, buying recently “discounted” stocks is usually a losing strategy. That’s because weak stocks usually get weaker, not stronger.

And I have some eye-popping numbers to back up that claim.

Imagine for a minute that you’re limited to buying S&P 500 stocks. And that you can choose one of the following two investment strategies.

After sorting all 500 stocks in the S&P 500 index, based on their performance over the last quarter or so… you can either:

Buy the 50 Best Performing stocks… and hold them for a quarter or so.

Buy the 50 Worst Performing stocks… and hold them for a quarter or so.

We’ll call Option A, “buying the winners,” and Option B, “buying the losers.”

Although most investors don’t think they’re buying “losers,” they mistakenly think they’re buying “a nicely discounted stock.” That’s what Bill, our fictitious investor from yesterday’s story, thought when he decided to buy three stocks in late 2007, at “discounts” of 13%… 17%… and 40%.

Sure enough, the three stocks that Bill bought at a “discount” – Bed Bath & Beyond, American Airlines and E-Trade – were trading at even deeper discounts a few months later, as the stocks dropped a further 17%… 54%… and 65%, respectively, by March of 2008.

Simply put: “cheap” got cheaper (and Bill lost his shirt).

And this concept isn’t limited to a few cherry-picked examples. Take a look at three of the research studies I ran, all of which show the same trend: weak stocks get weaker.

Buying the losers (Bottom 50 S&P stocks) in late 2007 would have handed you an average loss of xx% by March 2008. Meanwhile, Top 50 stocks held up much better. Take a look:

The same thing happened a few months later.

Buying the losers (Bottom 50 S&P stocks) in early 2008 (while thinking, “the worst must be over”) would have handed you an average loss of xx% by August 2008. Meanwhile, Top 50 stocks held their ground.